Real estate and major global cities
Among the world’s major cities, there are Paris, London, New York or Hong Kong. But how is the housing market in these famous cities that attract tourists and local investors as foreigners?
The point on the property market in Paris
The major French cities include Paris course. The capital city of the Hexagon is known for its high prices and housing difficult to find, especially for the less affluent (students, young families …). Yet the City of Lights displays down overall prices and interest rates that are too. Two good reasons for investors who are thus more numerous.
The French capital has currently a little more than one buyer – 1.2 specifically – for a seller while several months ago, there were about a buyer to a seller. The conclusion is the following: the number of buyers is increasing, since the first half of 2011.
If higher sales is traditionally observed in the spring, the summer is not the only explanation. Miscellaneous items, such as falling prices and very low interest rates, are also taken into account. It is indeed this favorable environment that encourages buyers to invest in Paris, where the purchasing power increased by 2.8% from 1 January 2015. It is estimated that 2% is due to lower interest rates and the rest to lower prices per square meter.
Interest rates are historically low end, but not only in Paris. Since the beginning of May 2015, they continue to fall from 0.05% to 0.20% depending on the city and durations of loans. All the major French cities (outside Bordeaux, Strasbourg or Toulouse) and shows falling rates.
Since the beginning of the year, the overall trend is to lower prices in the Paris area. However, it is noted that they increased slightly at the beginning of the second quarter 2015.
Slight rise in prices
If the first quarter 2015 was marked by a decline in the Parisian property prices (-0.8% in February and -0.4% in March), in April it has been synonymous with rising prices. This increase was however very small because the estimated 0.2%.
According to real estate professionals, this small increase does not change the underlying trend of the Parisian real estate market remains bearish. It would indeed we reach the figure of two buyers for a seller that the trend reverses. But we are still far, as we recall, Paris has 1.2 buyer for a seller.
What about prices in the suburbs? The Hauts-de-Seine were down 0.2% while in Seine-Saint-Denis, this is an increase of 0.3% was observed.
In Paris, the overall decrease in prices and interest rates attracted buyers. And the London side, how is the real estate market?
The point on the property market in London
London still attracts many tourists. However, it is noted that more and more buyers are fleeing the capital and largest city in the UK where prices increase more than in Paris.
From a planning perspective, the French capital and the English capital are quite similar. Similarly, with regard to prices, they are well above other major European cities.
But in 2014, the gap between prices in the two capitals widening. While in Paris, the trend is downward in London the opposite happens. Since 2007, property prices have increased from 26% to 36% against Paris to London to become an owner, you have to spend on average 700 thousand euros (170 thousand euros against a comparable dwelling located in Birmingham).
How to explain this difference between the Parisian and London prices? By managing the economy that differs in both cities. In Paris, austerity plans have replaced stimulus plans while in London, massive stimulus packages were implemented.
Stimulus packages to boost real estate
Funding for lending, Help to buy … England managed to give new impetus to its growth through stimulus policy.
The first plan – Funding for lending – is “designed to inject liquidity into the British economy” while the second – Help to Buy – is “dedicated to purchasing real estate […]. The British authorities guarantee up to 15% of a mortgage in the new or the old, limited to 600 000 pounds in order to encourage banks and mortgage funds to agree to finance households representing a contribution 5% of the purchase price “.
In addition to these stimulus plans to boost the economy, other factors explain the rise in prices in the London real estate.
Constructions down and regulated, “London calling” …
The stimulus plans implemented by the UK government are indeed not solely responsible for the price rise. With a very low number of housing construction in the UK (140 000 in 2013 against just over 280 000 in France), which continues to fall, real estate is suffering from a supply lower than demand that the main consequence higher price.
Furthermore, it is strictly forbidden to build on green crowns located around large English cities like London. The perimeter of English cities is thus limited, preventing urban sprawl and also leading to a rise in prices.
In addition, the attractiveness of London at international level, higher than that of Paris, also explains the high prices. Foreign buyers “now represent 50% of all new buyers in the territory of Greater London, against only 7% on what will be considered the perimeter of the Grand Paris”.
The high prices are not just about sales. Rents are also expensive and it becomes difficult for many people to live alone in a dwelling. The roommate is often considered more of necessity than choice.
Paris experiencing an overall decline in its housing sales prices and a decrease in interest rates. London, meanwhile, is witnessing a surge in sales prices and rents, due mainly to an offer well below the demand and a high attractiveness of the city.
And in New York, Berlin, Barcelona or Hong Kong, what is the state of the property market?
Real estate and major cities : New York, Barcelona …
London and Paris are not the only big cities in the world! Barcelona (Spain), New York (USA), Tokyo (Japan) and Hong Kong (China) are also part of the long list of great world metropolises.
New York, a city as expensive as Paris
New York … Many people dream of settling there. But with median prices 3.2 times higher than Paris, the Manhattan district and the city in general are not accessible to all portfolios. You want to invest in a two or three-bedroom apartment in Manhattan? It will cost 70% more expensive than in Paris. Specifically, for a two-room apartment worth 280,000 euros in Paris, you will spend 476,000 euros in New York.
The New York square meter can reach between 80 000 and 90 000 euros while in Paris, the highest prices are around 25 to 35 thousand euros per square meter. The strong correlation between stock market and real estate in New York is the main reason behind these impressive price differences, not to mention the salaries of investors and attractiveness of the Big Apple.
In addition, the New York metropolis has benefited from the subprime crisis, which has had the effect, a spectacular recovery in the housing market. Thus, in 2014, New York has seen its price rise by 14%. The term “subprime” associated “to real estate loans in the early 2000s to US households with poor credit, the amount was pledged on the value of the property. As long as housing prices continued to rise, these loans have yielded high returns […]. The downturn in the US housing market in early 2007 and the first losses associated with these securitized mortgages triggered a […] “subprime crisis” … ”
New York is famous for its skyscrapers which are installed multiple companies. This is also the case of Hong Kong, which has the largest number of skyscrapers at least 100 meters.
Hong Kong skyscrapers with incredibly high rents
In 2014, the Knight Frank Group determines the classification of cities where rents skyscrapers are highest. Hong Kong takes the cake  (followed by New York and Tokyo) with prices per square meter, which increased by over 11% during the second half of 2014.
Trying to install your company in a tower of grade A? You will then need to provide more than 2500 euros per square meter. A substantial sum that some large companies can afford to spend.
But businesses are not the only ones concerned by high prices, private individuals are since the rating, since 2010, a general surge in property prices in the Chinese metropolis. In November 2014, these prices have peaked despite the measures implemented by the government. Strong demand, especially from wealthy Chinese investors, and the lack of building land partly explain this incredible rise.
The property market in Hong Kong and is considered the most expensive in the world. If some can quite afford to invest in stone despite such high prices, some are otherwise. So even Hongkongers earning high wages fail to access the property. And those who earn little money living in deplorable conditions with the only “house” a kind of cage, also serves as bed.
Other major global cities
In Germany, the organization of the real estate market differs somewhat from that of other major European cities like Paris and London. Thus, the attractiveness of the country is shared by half a dozen major cities, including Berlin. The result ? A more spread demand but also more homogeneous prices.
In Barcelona, for existing homes, the price per square meter is around 4200 euros to 7500 euros against Rome, for example. Regarding prices in general, they were halved between 2007 and 2013. For a Barcelona apartment of 50 square meters, you will provide a budget of 140,000 euros. One can also find apartments of 80 square meters in the city center for a little more than 250,000 euros. Prices may exceed one million euros for prestigious assets such as buildings over 440 square meters.
In summary, compared to other cities, the city of Paris is not so expensive as that. So it only remains to find a home!
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